Singapore’s retail landscape has changed significantly since the pre-pandemic era. As a consequence, rentals, occupancy costs, and consumer behaviour have shifted.
These inevitable changes arise from economic and policy-driven factors. Headlines often highlight rent declines or increases.
However, a deeper look at the data shows a nuanced story. This story involves affordability, sustainability, and the evolving retail ecosystem.
Below, we break down the key insights and trends shaping Singapore’s retail sector.
These declines highlight the post-pandemic recalibration of retail spaces, as footfall patterns shifted and e-commerce gained traction.
Occupancy costs provide a clearer picture of rent affordability relative to sales, showing that while rents have declined, tenant profitability remains under pressure.
The Flor Patisserie example illustrates how property prices, rental yields, and rent levels interact in the commercial property market:
| Key Insight | Details |
|---|---|
| Current Rent | S$5,400/month (S$2.93 psf), yielding 2.03%, which is insufficient to cover mortgage costs based on the December 2021 transaction price of S$3.2 million. |
| New Asking Rent | S$8,400/month (S$4.56 psf), boosting yield to 3.18%. |
| Neighbour Unit (#44 Siglap Drive) | Rent of S$4,500/month yields 3.1% based on a May 2011 transaction price of S$1.75 million. |
This case highlights how entry prices for properties influence rental yields. Thus, this underscores the growing attractiveness of commercial units amid higher residential ABSD rates.
Rising interest rates have increased borrowing costs, indirectly affecting commercial rents. Strata malls and shophouses, less regulated than REIT-operated malls, have seen sharper rent hikes.
This witnesses a (40-50%) on renewals, contrasting with the modest annual rent growth of ~0.75% in REIT malls.
Managed malls maintain a balanced trade mix (~30% F&B) to avoid cannibalisation and include non-meal trades (e.g., opticians, classes) to sustain footfall.
Overconcentration of similar trades risks zero-sum competition for customer wallet share.
Chain restaurants leverage central kitchens and bulk purchasing efficiencies to offset high labour costs. Post-Covid, Chinese F&B brands face challenges sourcing ingredients locally, leading to a rise in hot pot restaurants, which require fewer skilled chefs.
Global brands like Starbucks Roastery and Cheesecake Factory, requiring 100-200 full-time staff, struggle to operate in Singapore’s tight labour market.
Cities like Bangkok outperform Singapore as retail hubs due to lower costs and skilled manpower. Johor’s pricing and currency advantage also pose competitive threats.
Proposals for rent control, vacancy taxes, and restrictions on foreign brands (targeting Chinese brands) reflect growing concerns about affordability and competition.
However, rent control risks replicating inefficiencies seen in hawker centers, where low rents incentivise owners to lease quickly.
Chinese brands adopt rapid expansion strategies, achieving a minimum efficient scale (20-100 stores per city) and ranking stores by sales performance.
In contrast, Singaporean retailers expand slowly (~2-5 stores/year), struggling to compete with Chinese counterparts’ economies of scale (~200-500 stores/year).
Mall operators like CICT and FCT achieve ~99.3-99.7% occupancy, outperforming the URA retail occupancy rate of 93.8% in Q4 2024.
Their B2B2C model supports tenants through asset planning, leasing, marketing, and operations.
CapitaLand’s proactive tenant retention (~84.5% in 2024) and trade mix refreshment help sustain vibrancy. Older malls like Raffles City (39 years) and Plaza Singapura (50 years) remain well-maintained through ongoing capex investments.
Critics of suburban malls miss their accessibility, bringing brands like Aesop, Sushiro, and Shake Shack closer to residents outside Orchard Road.
| Key Insight | Details |
|---|---|
| Adaptive Reuse Projects |
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| Land Costs and Development |
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Singapore’s retail sector is navigating a complex landscape shaped by declining rents, rising operational costs, and evolving consumer preferences.
While occupancy costs provide a more accurate measure of affordability, other challenges, such as utilities, labour, and international competition, demand attention.
Mall operators play a critical role in sustaining vibrancy through proactive management, while policy reforms could address structural issues like high land costs.
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